Cedar Rapids National Bank v. Rhodes

Whitfield, O. J., delivered the opinion of the court. The authorities upon which appellee chiefly relies are Foster v. McKinnon, 38 L. J. Reports (N. S.) 310, and Whitney v. Snyder, 2 Lans. (N. Y.) 477, which are set out in the note to the case of Douglass v. Mailing, 29 Iowa, 498, 4 Am. Rep. 238. The principal case is squarely against the appellee. In that case the court said: “As between the bona -fide holder, receiving the paper before due for value, and the maker, the equities are all on the side of the first. The maker put his ■genuine signature to a note appearing upon its face fair and regular. In the regular course of business it comes into the hands of an innocent party, who has paid a valuable consideration for it, and has no notice of any infirmities or defenses attaching to the paper. Now it would be manifestly unjust to permit the maker, while admitting the genuineness of his signature, to defeat the note on the ground that, through his own culpable carelessness while dealing with a stranger, he signed the instrument without reading it or attempting to ascertain Its true contents. The law will favor, as between the holder and maker in such a case, the more innocent and diligent. The maker had it jn his power to protect himself from the fraud, but failed to do so. When the consequences of this act are about to be visited upon him, he seeks to make another bear it, on the ground that he was defrauded through his own gross negligence. He can certainly claim protection neither on the ground of his innocence nor diligence. The rule contended for by appellee would tend to destroy all confidence in commercial paper. It is better that defendant and others, who so carelessly affix their names to paper, the contents of which are ■unknown to them, should suffer from the fraud which their [703] recklessness invites, than that the character of commercial •paper should be impaired, and the business of the country thus interfered with and unsettled.” In the two other cases cited in the note, the reason of the holding that the maker of the note might successfully defend was that the maker’s mind never had assented to the contract in the note -embodied, he (the maker) having been induced to sign the note, believing it to be a wholly different contract; and this defense was held to be good only in a case where the evidence clearly showed, as repeatedly stated in said note, that the maker was not guilty of negligence in signing the note and in not ascertaining what he was signing. For example, in Whitney v. Snyder, supra, the maker offered to prove 'in defense that he was unable to read. Now, this principle, resting upon the ••absence of any negligence on the part of the maker of the negotiable note payable to bearer, finds no application in the facts -of this record. The testimony makes it perfectly clear that the appellee could read, and that he did read practically the whole •of the order; for he states the contents of the order perfectly, with the exception that he said he knew nothing about any free watch to be given. It would be utterly subversive of the security of commercial paper to hold that, where the testimony shows that the maker of the note, who could read, was so grossly negligent as not to inform himself of the contents of- the note he was signing, when, too-, he did read and knew the contents ■of the order, he might defeat such note in the hands of an innocent purchaser for value without notice. There ought to have been a peremptory instruction for the plaintiff in the case on the testimony in this record,, since there was no evidence tending to show any knowledge of fraud in the inception of the note on the part of appellant. Reversed and remanded.